Framework Guidelineon gas capacity allocation

Stefanie Neveling, Co-Chair CAM TF 20th Madrid Forum, 27 September 2011

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Process on CAM Guidelines and Codes

ENTSOG develops NC

NC in Comitology

ERGEG adopts revised Pilot CAM FG

COM evaluates Pilot FG invitation to ENTSOG

Dec. 2010

Jan. 2011

Mid/End 2012

ACER consults FG ACER adopts FG

March 2011

3rd August 2011

ACER opinion on NC (and revision by ENTSOG)

20th MF

COM evaluates FG invites ENTSOG to transfer Pilot into formal procedure

9 March 2012

March/April 2012

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ACER public consultation process

.Run from 3 March to 2 May 2011

.No detailed questions, 35 responses received, non-confidential answers published on ACER website

. Invitation to provide only comments that go beyond the input to ERGEG consultation (if any)» Previous ERGEG consultations Jan. 2009, Dec. 2009

. Limited length for responses but possibility to enclose additional documents» Comments were read and taken into account;» Publication of Evaluation of Comments on ACER website on 2 August.

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.Generally: stakeholder support CAM Guideline, recommendation to include incremental capacity.

. 2.4.1 Bundled services» Majority of shippers: opposition to exclusive bundling,

support bundled products as an option only;» Industrial consumers and some shippers support

exclusive bundling.

. 2.4.2 Amendment of existing capacity contracts (sunset clause)» Majority of shippers and TSOs: opposition or serious

concerns about the sunset clause (unilateral change of contract, risks of loss of revenues for TSOs, impact on supply contracts, benefits unproved);

» Default rule: concerns about respective roles of TSOs and NRAs.

Results of Public Consultation

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Legal and economic analysis

.Six regulators commissioned consultants to provide an analysis on mandatory bundling.. The study was split in two parts: » RAUE LLP was chosen for the

legal part;» Frontier Economics took the

economic part. The results of the two studies were submitted on 30 June 2011..Studies are published on ACER

website.

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Summary of economic effects

.Concentration of all gas volumes at the VTPs» increase of liquidity at the hubs;

.“Spare Capacity“ effect increase of accessible capacity;

.Overall improvement of competition (HHI, RSI);

.Increase of transparency as one party can nominate.

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Summary of legal analysis – sunset clause

» European legislators can lay down new conditions for existing long-term capacity contracts;

» Negative effects to fundamental rights reduced to a proportional level by a 5 years transitional period (proportionality);

» Sunset Clause amends non-essential elements of the Gas Regulation by supplementing it;

» Specific contractual structure necessary (one contract for customer).

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Summary of legal analysis – default rule

» Obligation on all parties of the capacity contracts;» NRAs to impose appropriate sanctions if necessary;

» No unilateral right to terminate supply contract security of supply not at stake!

» Modification of existing contracts according to the “default rule” does not impose a significant risk to the TSO;

» ENTSOG’s legal concerns are fully addressed.

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Changes made to the final FG text

. Clarification of the “Default rule”:» Based on the legal advice

the “default rule” has been changed to oblige both parties to a capacity contract, i.e. TSO and shipper;

» NRAs to ensure compliance with Regulation 715/2009 and annexes.. Adaptation of existing

transportation arrangements » Extension from six to nine

months implementation period.. General wording improvements.

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Thank you for your attention!

www.energy-regulator.eu

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3. Summary of economic analysis – 1

.Main conclusions – without foreclosure of new capacity» Without foreclosure the sunset clause unambiguously improves

competitive outcomes;» In all cases, the application of the sunset clause reduces the

extent to which any player is pivotal, i.e. the RSI increases.

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3. Summary of economic analysis – 2

.Main conclusions – with foreclosure of new capacity» Under the “with foreclose” assumption, in most cases the

Sunset Clause improves competition.